Historical Financial Statements (Income Statement, Balance Sheet, and Statement of Cash Flows) from the 3 most current years for Southwest Airlines, from the www.SEC.gov website.

The snapshots of the financial statements must include horizontal (shown between the years) and vertical analysis (shown to the right of the last year of historical data).

Ratio analysis for the ratios shown on Table 1 in the Guide to Case Analysis (CA) of the textbook: a. Profitability ratios b. Liquidity ratios c. Leverage ratios d. Activity ratios e. Price-to-earnings ratio f. The changes between years are included in the calculations

Competitor ratios to compare with the ratios that were calculated in item 2. These should be included on the same tab as the ratio analysis for the firm

Financial analysis should include comparisons to the firm's main competitor (Delta Airlines) as well as to the industry. How does the financial position of the firm influence the strategic direction of the company? This section should not be used to define what each ratio is rather it should clearly provide analysis based on the calculations as to the strategic choices and implications of the firm's financial position. A compare and contrast with the main competitor should be included in this section of narrative.

Southwest Airlines

Profitability Ratio:	2020	2021	2022
Gross profit margin	-7.020%	34.120%	25.630%
Operating profit margin (return on sales)	-42.180%	10.900%	4.270%
Net profit margin (net return on sales)	-33.970%	6.190%	2.260%
Total return on assets	$15,173	$18,036	$14,808
Net return on total assets (ROA)	-8.890%	2.690%	1.520%
Return on stockholder's equity (ROE)	-31.900%	9.900%	5.000%
Return on invested capital (ROIC or ROCE)	-16.100%	6.900%	4.400%
Liquidity Ratio:
Current ratio	2.021	1.968	1.427
Working capital	$ 7,667	$ 8,872	$ 4,430
Leverage ratio:
Total debt-to-assets	0.292	0.283	0.227
Long-term debt-to-capital	0.540	0.497	0.430
debt-to-equity	1.199	1.030	0.757
Long-term debt-to-equity	1.139	0.987	0.753
Times interest earned (coverage)	-10.934	3.685	2.991
Activity Ratio:
Days of inventory	4.960	2.570	2.630
Inventory turnover	23.389	19.372	22.419
Average collection period	4.962	2.566	2.629
Price-to-earnings Ratio:	0	26.21	41.19

Consolidated Statement of Income (Loss) - USD ($) $ in Millions	Year End December 31	Increase/Decrease Amount	Increase/Decrease %
Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022	2020-2021	2021-2022	2020-2021	2021-2022
OPERATING REVENUES:
Total operating revenues	$ 9,048	$ 15,790	$ 23,814	6,742	8,024	75%	51%
OPERATING EXPENSES, NET:
Salaries, wages, and benefits	6,811	7,743	9,376	932	1,633	14%	21%
Payroll support and voluntary Employee programs, net	(967)	(2,960)	0	(1,993)	2,960	206%	-100%
Fuel and oil	1,849	3,310	5,975	1,461	2,665	79%	81%
Maintenance materials and repairs	750	854	852	104	(2)	14%	0%
Landing fees and airport rentals	1,240	1,456	1,508	216	52	17%	4%
Depreciation and amortization	1,255	1,272	1,351	17	79	1%	6%
Other operating expenses	1,926	2,394	3,735	468	1,341	24%	56%
Total operating expenses, net	12,864	14,069	22,797	1,205	8,728	9%	62%
OPERATING INCOME (LOSS)	(3,816)	1,721	1,017	5,537	(704)	-145%	-41%
OTHER EXPENSES (INCOME):
Interest expense	349	467	340	118	(127)	34%	-27%
Capitalized interest	(35)	(36)	(39)	(1)	(3)	3%	8%
Interest income	(32)	(13)	(217)	19	(204)	-59%	1569%
Loss on extinguishment	0	28	193	28	165	#DIV/0!	589%
Other (gains) losses, net	(158)	50	(12)	208	(62)	-132%	-124%
Total other expenses (income)	440	396	289	(44)	(107)	-10%	-27%
INCOME (LOSS) BEFORE INCOME TAXES	(4,256)	1,325	728	5,581	(597)	-131%	-45%
PROVISION (BENEFIT) FOR INCOME TAXES	(1,182)	348	189	1,530	(159)	-129%	-46%
NET INCOME (LOSS)	$ (3,074)	$ 977	$ 539	4,051	(438)	-132%	-45%
NET INCOME (LOSS) PER SHARE, BASIC (in USD per share)	$ (5.44)	$ 1.65	$ 0.91	7	(1)	-130%	-45%
NET INCOME (LOSS) PER SHARE, DILUTED (in USD per share)	$ (5.44)	$ 1.61	$ 0.87	7	(1)	-130%	-46%
Passenger
OPERATING REVENUES:
Total operating revenues	$ 7,665	$ 14,066	$ 21,408	6,401	7,342	84%	52%
Freight
OPERATING REVENUES:
Total operating revenues	161	187	177	26	-10	16%	-5%
Other
OPERATING REVENUES:
Total operating revenues	$ 1,222	$ 1,537	$ 2,229	315	692	26%	45%

				Increase/Decrease Amount	Increase/Decrease %
Consolidated Balance Sheet - USD ($) $ in Millions	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022	2020-2021	2021-2022	2020-2021	2021-2022
Current assets:
Cash and cash equivalents	$ 11,063	$ 12,480	$ 9,492	1,417	(2,988)	13%	-24%
Short-term investments	2271	3,024	2,800
Accounts and other receivables	1130	1,357	1,040	227	(317)	20%	-23%
Inventories of parts and supplies, at cost	414	537	790	123	253	30%	47%
Prepaid expenses and other current assets	295	638	686	343	48	116%	8%
Total current assets	15,173	18,036	14,808
Property and equipment, at cost:
Flight equipment	21629	21,226	23,725	(403)	2,499	-2%	12%
Ground property and equipment	6083	6,342	6,855	259	513	4%	8%
Deposits on flight equipment purchase contracts	305	0	376	(305)	376	-100%	#DIV/0!
Assets constructed for others	309	6	28	(303)	22	-98%	367%
Property and equipment, at cost	27574	27,574	30,984
Less allowance for depreciation and amortization	11743	12,732	13,642	989	910	8%	7%
Property and equipment, net	15831	14,842	17,342	(989)	2,500	-6%	17%
Goodwill	970	970	970	0	0	0%	0%
Operating	1892	1,590	1,394	(302)	(196)	-16%	-12%
Other assets	722	882	855	160	(27)	22%	-3%
Total assets	34588	36,320	35,369
Current liabilities:
Accounts payable	931	1,282	2,004	351	722	38%	56%
Accrued liabilities	2259	1,624	2,043	(635)	419	-28%	26%
Current operating lease liabilities	306	239	225	(67)	(14)	-22%	-6%
Air traffic liability	3790	5,566	6,064	1,776	498	47%	9%
Current maturities of long-term debt	220	453	42
Total current liabilities	7506	9,164	10,378
Long-term debt less current maturities	10111	10,274	8,046	163	(2,228)	2%	-22%
Air traffic liability - noncurrent	3343	2,159	2,186
Deferred income taxes	1634	1,770	1,985
Operating	1562	1,315	1,118	-247	-197	-16%	-15%
Other noncurrent liabilities	1247	1,224	969
Stockholders' equity:
Common stock, $1.00 par value: 2,000,000,000 shares authorized; 888,111,634 shares issued in 2022 and 2021	888	888	888	0	0	0%	0%
Capital in excess of par value	4191	4,224	4,037	33	-187	1%	-4%
Retained earnings	14777	15,774	16,261
Accumulated other comprehensive income	-105	388	344
Treasury stock, at cost: 294,111,813 and 295,991,525 shares in 2022 and 2021, respectively	-10875	(10,860)	(10,843)
Total stockholders' equity	8876	10,414	10,687
Total liabilities and stockholders' equity	$ 34,588	$ 36,320	$ 35,369

Consolidated Statement of Cash Flows - USD ($) $ in Millions	12 Months Ended
Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (3,074)	$ 977	$ 539
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	1,255	1,272	1,351
Impairment of long-lived assets	32	12	35
Unrealized mark-to-market adjustment on available for sale securities	0	0	4
Unrealized/realized (gain) loss on fuel derivative instruments	15	(15)	(2)
Deferred income taxes	(716)	(21)	228
Gain on sale-leaseback transactions	(222)	0	0
Loss on extinguishment of debt	0	28	193
Changes in certain assets and liabilities:
Accounts and other receivables	(294)	(701)	422
Other assets	415	75	(66)
Accounts payable and accrued liabilities	231	38	936
Air traffic liability	1,623	591	525
Other liabilities	(306)	(103)	(334)
Cash collateral received from (provided to) derivative counterparties	9	141	(69)
Other, net	(95)	28	28
Net cash provided by (used in) operating activities	(1,127)	2,322	3,790
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(515)	(505)	(3,924)
Supplier proceeds	428	0	0
Proceeds from sale-leaseback transactions	815	0	0
Assets constructed for others	0	(6)	(22)
Purchases of short-term investments	(5,080)	(5,824)	(5,592)
Proceeds from sales of short-term and other investments	4,336	5,071	5,792
Net cash used in investing activities	(16)	(1,264)	(3,746)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock	2,294	0	0
Proceeds from issuance of long-term debt	5,622	0	0
Proceeds from term loan credit facility	3,683	0	0
Proceeds from revolving credit facility	1,000	0	0
Proceeds from convertible notes	2,300	0	0
Proceeds from Payroll Support Program loan and warrants	1,016	1,136	0
Proceeds from Employee stock plans	48	51	45
Repurchase of common stock	(451)	0	0
Payments of long-term debt and finance lease obligations	(839)	(612)	(2,437)
Payments of term loan credit facility	(3,683)	0	0
Payments of revolving credit facility	(1,000)	0	0
Payments of cash dividends	(188)	0	0
Payments of terminated interest rate derivative instruments	(59)	0	0
Payments for repurchases and conversions of convertible debt	0	(293)	(648)
Capitalized financing items	(134)	0	0
Other, net	49	77	8
Net cash provided by (used in) financing activities	9,658	359	(3,032)
NET CHANGE IN CASH AND CASH EQUIVALENTS	8,515	1,417	(2,988)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,548	11,063	12,480
CASH AND CASH EQUIVALENTS AT END OF PERIOD	11,063	12,480	9,492
CASH PAYMENTS FOR:
Interest, net of amount capitalized	212	336	305
Income taxes	19	445	20
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Adoption of Accounting Standards Update 2020-06, Debt (See Note 3)	0	0	245
Right-of-use assets acquired under operating leases	915	327	58
Flight equipment acquired against supplier credit memo	0	569	0
Assets constructed for others	145	309	0
Remeasurement of right-of-use asset and lease liability	$ 0	$ 343	$ 0

Delta Airlines

Profitability Ratio:	2020	2021	2022
Gross profit margin	-3.744%	24.763%	33.937%
Operating profit margin (return on sales)	-72.940%	6.308%	7.238%
Net profit margin (net return on sales)	-72.448%	0.937%	2.606%
Total return on assets	$1,892	$72,459	$72,288
Net return on total assets (ROA)	-17.202%	0.386%	1.823%
Return on stockholder's equity (ROE)	-807.366%	7.204%	20.024%
Return on invested capital (ROIC or ROCE)	-5.100%	1.980%	3.380%
Liquidity Ratio:
Current ratio	1.093	0.760	0.502
Working capital	$ 1,477	$ (5,026)	$ (12,929)
Leverage ratio:
Total debt-to-assets	0.381	0.347	0.286
Long-term debt-to-capital	0.947	0.866	0.759
debt-to-equity	19.449	6.926	3.499
Long-term debt-to-equity	17.878	6.647	3.141
Times interest earned (coverage)	13.422	-1.475	-3.558
Activity Ratio:
Days of inventory	15.460	11.100	10.760
Inventory turnover	23.620	32.870	33.920
Average collection period	177.000	23.189	20.132
Price-to-earnings Ratio:	0	92.85	16.07

Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
Current Assets:
Cash and cash equivalents	$ 11,063	$ 7,933	$ 3,266
Short-term investments	2,271	3,386	3,268
Accounts receivable, net of an allowance for uncollectible accounts of $23 and $50	1,130	2,404	3,176
Fuel, expendable parts and supplies inventories, net of an allowance for obsolescence of $136 and $176	414	1,098	1,424
Prepaid expenses and other	295	1,119	1,877
Total current assets	15,173	15,940	13,011
Noncurrent Assets:
Property and equipment, net of accumulated depreciation and amortization of $20,370 and $18,671	21,629	28,749	33,109
Operating lease right-of-use assets	6,083	7,237	7,036
Goodwill	305	9,753	9,753
Identifiable intangibles, net of accumulated amortization of $902 and $893	309	6,001	5,992
Equity investments	27,574	1,712	2,128
Deferred income taxes, net	11,743	1,294	325
Other noncurrent assets	15,831	1,773	934
Total noncurrent assets	970	56,519	59,277
Total assets	1,892	72,459	72,288
Current Liabilities:	722
Current maturities of debt and finance leases	34,599	1,782	2,359
Current maturities of operating leases		703	714
Accounts payable	931	4,240	5,106
Accrued salaries and related benefits	2,259	2,457	3,288
Fuel card obligation	306	1,100	1,100
Other accrued liabilities	3,790	1,746	1,779
Total current liabilities	220	20,966	25,940
Noncurrent Liabilities:	7506
Debt and finance leases	10,111	25,138	20,671

Consolidated Statements of Operations - USD ($)	12 Months Ended
Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
Operating Revenue:
Total operating revenue	$ 17,095,000,000	$ 29,899,000,000	$ 50,582,000,000
Operating Expense:
Salaries and related costs	9,001,000,000	9,728,000,000	11,902,000,000
Aircraft fuel and related taxes	3,176,000,000	5,633,000,000	11,482,000,000
Ancillary businesses and refinery	1,785,000,000	3,957,000,000	5,756,000,000
Contracted services	1,953,000,000	2,420,000,000	3,345,000,000
Landing fees and other rents	1,833,000,000	2,019,000,000	2,181,000,000
Depreciation and amortization	2,312,000,000	1,998,000,000	2,107,000,000
Regional carrier expense	1,584,000,000	1,736,000,000	2,051,000,000
Aircraft maintenance materials and outside repairs	822,000,000	1,401,000,000	1,982,000,000
Passenger commissions and other selling expenses	643,000,000	953,000,000	1,891,000,000
Passenger service	551,000,000	756,000,000	1,453,000,000
Profit sharing	0	108,000,000	563,000,000
Aircraft rent	399,000,000	430,000,000	508,000,000
Restructuring charges	8,219,000,000	(19,000,000)	(124,000,000)
Government grant recognition	(3,946,000,000)	(4,512,000,000)	0
Other	1,232,000,000	1,405,000,000	1,824,000,000
Total operating expense	29,564,000,000	28,013,000,000	46,921,000,000
Operating Income/(Loss)	(12,469,000,000)	1,886,000,000	3,661,000,000
Non-Operating Expense:
Interest expense, net	(929,000,000)	(1,279,000,000)	(1,029,000,000)
Impairments and equity method results	(2,432,000,000)	(337,000,000)	(20,000,000)
Gain/(loss) on investments, net	(105,000,000)	56,000,000	(783,000,000)
Loss on extinguishment of debt	(8,000,000)	(319,000,000)	(100,000,000)
Pension and related benefit	219,000,000	451,000,000	292,000,000
Miscellaneous, net	137,000,000	(60,000,000)	(107,000,000)
Total non-operating expense, net	(3,118,000,000)	(1,488,000,000)	(1,747,000,000)
Income/(Loss) Before Income Taxes	(15,587,000,000)	398,000,000	1,914,000,000
Income Tax (Provision)/Benefit	3,202,000,000	(118,000,000)	(596,000,000)
Net Income/(Loss)	$ (12,385,000,000)	$ 280,000,000	$ 1,318,000,000
Basic Earnings/(Loss) Per Share (USD per share)	$ (19.49)	$ 0.44	$ 2.07
Diluted Earnings (Loss) Per Share (USD per share)	(19.49)	0.44	2.06
Cash Dividends Declared Per Share (USD per share)	$ 0.40	$ 0	$ 0
Passenger
Operating Revenue:
Total operating revenue	$ 12,883,000,000	$ 22,519,000,000	$ 40,218,000,000
Cargo
Operating Revenue:
Total operating revenue	608,000,000	1,032,000,000	1,050,000,000
Other
Operating Revenue:
Total operating revenue	$ 3,604,000,000	$ 6,348,000,000	$ 9,314,000,000

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2022
Cash Flows From Operating Activities:
Net income/(loss)	$ (12,385)	$ 280	$ 1,318
Adjustments to reconcile net income to net cash provided by operating activities:
Restructuring charges	4,111	5	(46)
Depreciation and amortization	2,312	1,998	2,107
Deferred income taxes	(3,110)	115	591
(Gain)/loss on fair value investments	88	(38)	874
Pension, postretirement and postemployment payments (greater)/less than expense	898	(2,038)	(453)
Impairments and equity method results	2,432	337	20
Changes in certain assets and liabilities:
Receivables	1,168	(981)	(728)
Fuel inventory	354	(318)	(158)
Prepaids and other current assets	0	(58)	(867)
Profit sharing	(1,650)	108	455
Other payables, deferred revenue and accrued liabilities	240	1,986	1,226
Noncurrent liabilities	1,185	(399)	(348)
Other, net	681	77	146
Net cash provided by/(used in) operating activities	(3,793)	3,264	6,363
Property and equipment additions:
Flight equipment, including advance payments	(896)	(1,596)	(4,495)
Ground property and equipment, including technology	(1,003)	(1,651)	(1,871)
Proceeds from sale-leaseback transactions	465	0	0
Purchase of equity investments	(2,099)	0	(870)
Purchase of short-term investments	(13,400)	(12,655)	(2,704)
Redemption of short-term investments	7,608	15,036	2,804
Other, net	87	(32)	212
Net cash used in investing activities	(9,238)	(898)	(6,924)
Cash Flows From Financing Activities:
Proceeds from short-term obligations	3,261	0	0
Proceeds from long-term obligations	22,790	1,902	0
Proceeds from sale-leaseback transactions	2,306	0	0
Payments on debt and finance lease obligations	(8,559)	(5,834)	(4,475)
Repurchase of common stock	(344)	0	0
Cash dividends	(260)	0	0
Fuel card obligation	364	0	0
Other, net	(202)	80	(60)
Net cash (used in)/provided by financing activities	19,356	(3,852)	(4,535)
Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash	6,325	(1,486)	(5,096)
Cash, cash equivalents and restricted cash at beginning of period	3,730	10,055	8,569
Cash, cash equivalents and restricted cash at end of period	10,055	8,569	3,473
Supplemental Disclosure of Cash Paid for Interest	761	1,524	1,261
Non-Cash Transactions:
Right-of-use assets acquired under operating leases	1,077	2,113	531
Flight and ground equipment acquired under finance leases	381	1,049	91
Equity investments and other financings	280	0	330
Operating leases converted to finance leases	0	42	342
Air traffic
Changes in certain assets and liabilities:
Liabilities and deferred revenue	(572)	1,814	1,902
Loyalty program
Changes in certain assets and liabilities:
Liabilities and deferred revenue	$ 455	$ 376	$ 324